In-depth Analysis | The Real Significance of Stablecoins for the United States, Emerging Markets, and the Future of Currency

Stablecoins have become at the heart of the new financial internet, and the digital dollar is reshaping the global financial system, providing a financial lifeline for emerging markets. (Summary: The double-faced blade of stablecoins: Fear of capital outflows from developing countries and undermine financial stability) (Background supplement: Japan's three major banks announce joint issuance of yen stablecoins: Financial Services Agency approves Mitsubishi UFJ, Sumitomo Mitsui and Mizuho to participate in payment innovation PIP) Preface For the past few days, I've been thinking about a recent post by Sandeep (Co-founder and COO of Polygon). This prompted me to re-read my notes and delve into some of the material, and the more I studied the numbers, the more I felt that everything made sense (much clearer than most people probably realized). By the end of 2024, Tether had become the seventh-largest foreign buyer of U.S. Treasuries, surpassing countries such as Canada and Mexico in annual purchases. Today, this argument is even stronger. Stablecoins have quietly emerged as one of the biggest forces driving global demand for the dollar, while also providing a financial lifeline for emerging markets that are suffering from inflation, currency depreciation, and capital controls. In this article, I will analyze recent data and trends that indicate that “dollarization 2.0” is on the rise. The era of the petrodollar is over, and this shift is shaping a world in which both the United States and emerging economies will benefit, at least in the short to medium term. We will see how stablecoins quickly become the “lifeline” of global financial markets, not only in the cryptocurrency space, but also as a hedge and store of value in emerging economies where local currencies are vulnerable. Stablecoins have quickly evolved from a niche trading instrument to a mainstay of global crypto finance. In 2024, on-chain stablecoin transactions reached $15.6 trillion, about 20% more than Visa's annual payments. At present, the total supply of cryptocurrencies has exceeded $300 billion, with an annual growth rate of more than 50%. These dollar-pegged tokens, led by Tether's USDT, power a wide range of applications from cryptocurrency trading and DeFi protocols to remittances and everyday payments. Its appeal is simple but powerful: stablecoins combine the reliability of fiat currencies with the speed and borderlessness of cryptocurrencies, enabling near-instant, low-cost settlements worldwide. More than $100 billion in stablecoin transactions occur on public blockchains every day, and their annual transaction volume already matches or exceeds them of major payment networks. A CEX.io report states that stablecoin transfers will reach $27.6 trillion in 2024, about 8% more than Visa and Mastercard combined. This astonishing usage highlights how stablecoins have achieved a true product-market fit: users value being able to transact in currencies pegged to the US dollar (or other fiat currencies) without having to endure the volatility of typical cryptocurrencies. Chart: Q4 2024 on-chain stablecoin transfers (blue) versus Visa (pink) and Mastercard (yellow) payments. By the fourth quarter of 2024, the value processed by the stablecoin network has significantly exceeded that of the major card networks. There are several reasons why stablecoins are popular and growing so rapidly: They are both stable and familiar by being pegged 1:1 to fiat currencies, mainly the US dollar, avoiding the volatility of cryptocurrencies while retaining the advantages of blockchain. They enable round-the-clock transactions around the world, with settlement times reduced from days to minutes (ideal for remittances and cross-border trade). They offer low fees and usually only a fraction of a cent per transfer, making both small and large payments possible. They promote financial inclusion, enabling anyone with internet access to a stable, accessible currency (especially in countries with inflation or weak banking systems). And they're programmable and integrate directly with DeFi for lending, trading, and earning. Let's take a look at how big the opportunity really is The U.S. M2 money supply is a broad measure of economic liquidity and includes cash, checking deposits, savings accounts, small time deposits, and retail money market funds. As of mid-2025, the size of M2 is about $22 trillion, which reflects the large amount of dollars circulating in the traditional financial system. Source: Article “Stablecoins may become one of the US government's most robust financial allies” In comparison, the global stablecoin market cap is about $300 billion, accounting for only about 1% of the M2 money supply in the United States. While the absolute value is still small, this contrast highlights the rapid growth of stablecoins and their huge room for expansion. Stablecoins are actually digital dollars running on the blockchain, and if they can account for a fraction of the M2 money supply, their market size could reach trillions of dollars, reshaping payments, remittances, and global dollar distribution. Importantly, stablecoins are becoming a complement, not a threat, to traditional payment networks. Even Morgan Stanley sees stablecoins as an incremental investment opportunity. Notably, the growth of these tokens could boost demand for short-term U.S. Treasuries, giving the Treasury more flexibility in covering deficits and managing cash flow. These tokens are capable of large settlements, such as interbank transfers or trade settlements, which can be cleared almost instantaneously, and operate similarly to a digital cash account. This practical tool has caught the attention of regulators. In the United States, the US Stablecoin National Innovation Guidance and Establishment Act (GENIUS Act) promulgated some time ago mandates that stablecoins must be backed by 1:1 reserves, and reserves must be backed by liquid assets such as treasury bonds or US dollars; Require monthly disclosures; and put consumer protection first, including safe disposal measures in the event of the issuer's bankruptcy. Across the Atlantic, the EU's MiCA regulation, which imposes licensing, transparency, and reserve standards on stablecoins, came into effect in mid-2024 to enhance their stability and market integrity. If properly regulated, stablecoins could trigger a once-in-a-generation change in the way money flows, making them faster, cheaper, and more seamless, while enhancing rather than replacing traditional payment networks. (We've seen this happen) From the Petrodollar to the Digital Dollar: How Stablecoins Extend U.S. Dominance The U.S. has long used the dollar's reserve currency status to consolidate its global influence, most notably the petrodollar system. Under this system, dollar-denominated oil exports ensure continued demand for dollars and U.S. Treasuries. Many believe that these days, dollar-backed stablecoins seem to be repeating history. These crypto tokens, such as USDT and USDC, are pegged 1:1 to the value of the US dollar and are largely backed by US assets. By promoting dollar stablecoins, the United States is effectively exporting dollars at the speed of the network, thereby cementing the dollar's hegemony in the digital economy in the same way that petrodollars underpinned the oil economy decades ago. U.S. policymakers have clearly embraced this trend. Under this administration, the United States passed the landmark GENIUS Act, which established a regulatory framework for stablecoin issuance. The intent of the bill is clear: to consolidate the dollar's position as the world's reserve currency and boost demand for U.S. Treasuries, which are backed by stablecoins. In other words, the U.S. government treats dollar stablecoins as…